The ongoing debate surrounding the U.S. economy’s state—recession, impending recession, or recovery—has persisted over the past year.
The aftermath of the post-COVID resurgence has introduced unprecedented fluctuations in economic indicators, posing challenges for accurate assessments. Supply chain rebound data suggests we may soon see a recovery.
Supply Chain Rebound Data Suggests A Recovery May Be Coming
Despite continued growth in retail sales, June recorded a modest 0.3% rise from May and a year-over-year increase of 1.5%. However, this growth remains the slowest since May 2020, according to the Commerce Department. Meanwhile, the Institute for Supply Management (ISM) reported a positive trend in the services economy, with the Services PMI marking a 3.6% increase to reach 53.9, indicating growth. Conversely, manufacturing experienced a slight decline in June, with the ISM reporting a reading of 46, down 0.9% month-on-month.
Promising data from the flexible work platform Instawork suggests that the supply chain could be on the brink of a significant rebound. The manufacturing sector is witnessing rising pay rates and an upsurge in labor demand. As businesses gradually reduce inventories from their COVID-induced highs, some are resuming their operations. The U.S. Census Bureau reported a 0.2% improvement in total business inventories to sales ratios in May compared to April. Although this ratio is higher, it remains 1.8% lower than May 2022.
Instawork’s Chief Economist, Daniel Altman, compiled data indicating that excessive inventories led to reduced work hours as manufacturers curtailed production. However, this trend is shifting, particularly among west coast manufacturers.
Notably, transportation, warehousing, wholesale, and retail trade have exhibited growth since March, reflecting increased demand for flexible labor. Hourly wages in manufacturing are also experiencing an upward trajectory, with May’s figures nearing $18 per hour, up from below $17 in April. In contrast, pay rates in transportation, warehousing, wholesale, and retail trade have remained relatively stable month-over-month.
Altman observes that the post-2022 economic reopening prompted a shift towards spending on services and experiences, causing a stall in goods demand. However, this surge has subsided, excess inventories have diminished, and demand for goods is resurging.
Economically, the second half of the year appears poised for normalization, closer to pre-pandemic times, according to Altman.
Instawork’s data highlights a significant surge in manufacturing labor demand, especially in the western region, with Phoenix leading the way. Manufacturing shifts in Phoenix quadrupled from January to May, while the Bay Area saw a 50% increase, positioning it as a mature market.
In the Midwest, labor demand aligns with the national trend, showing a slight recovery after a seasonal dip. Chicago, in particular, could benefit from the tight labor supply in the region. However, the East, including Atlanta and Philadelphia, does not show immediate signs of manufacturing recovery. The company suggests that a potential manufacturing rebound could be spearheaded by tech-focused businesses, moving from west to east, culminating in a more balanced trend by year-end, closer to pre-pandemic norms.
Altman clarifies that the decline in hours worked isn’t necessarily indicative of lower productivity; instead, it may reflect an increased availability of workers. Instawork’s platform currently boasts nearly 5 million available workers, up from 3 million a year ago. Although unemployment has remained relatively stable, Altman attributes the increase to more individuals seeking flexible work arrangements or supplementary employment.
